Climate change and rising raw materials prices could bring billions in investments to Arctic region

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The prospect of warmer temperatures in northern areas is seen as an asset in luring massive investments to Lapland in the coming years.
      “What is happening now is not linked with climate change, but rather with the global economy and the demand for raw materials”, explains Professor Paula Kankaanpää, who heads the Arctic Centre of the University of Lapland in Rovaniemi.
     
Northern sea areas are expected to be a focus of attention in years to come, but now most of the rise in economic activity is on dry land.
      At present, there is a surge in mining, which is not limited to Finnish Lapland.
      Rising prices of raw materials have brought increased investments into mining. The Financial Times reported in mid-December that a new record in worldwide mining investments is expected next year – more than EUR 90 million.
     
The arrival of new mining companies in Lapland is one indication of economic optimism, but it also contains the risk that expectations might be exaggerated. The rule would seem to be that the larger the sums of money, the longer the wait will be for the investments to pay off, and the greater the factors of uncertainty.
      There are question marks behind several of the projects linked with the mining industry, as Esko Lotvonen of the Regional Council of Lapland explains.
     
Under original plans, refined iron ore from the Pajala-Kolari mine on Finland’s border with Sweden was to have been taken by rail to Kemi. This would have involved an investment of EUR 200 million in rail infrastructure. Now it appears likely that it will be taken by road and rail to Narvik in Norway.
      There are also plans to transport phosphate from the Sokli mine near the Russian border south by train, but no permanent decisions have been made.
      In any case, mining activities and the jobs that they generate are likely to be of considerable importance for the economy of Finnish Lapland in the coming decades, if demand for key minerals continues as expected.
     
Finnish Lapland has long been losing population to other parts of the country through immigration, but Markku Heikkilä, head of communications at the Arctic Centre, says that the trend might be reversed, if the tourism and mining industries grow, and if the power company Fennovoima ends up building a nuclear power plant in Simo, near Kemi. The investment would be worth EUR 6 billion.
      However, one of the uncertainties in the calculations involves potential environmental objections to some of the projects – many of which come from the south of the country.
     
“Nobody in the north wants to live in a museum”, Paula Kankaanpää observes.
      She says that zoning in Finnish Lapland needs to be inplemented in a way that makes room for tourism, mining, wind farms, and reindeer herding.
     
While much of the talk in the south of Finland focuses on cutting costs, there is a sense of economic optimism in the north.
      “If the Arctic Ocean opens up, Finland will need connections through other places than the Baltic sea. We need to have them in the north as well”, Lotvonen says.
      He envisions a transport route from the Arctic Ocean through Finland to Eastern Europe, which would include a railway tunnel beneath the Gulf of Finland.
     
Finland does not have coastline of its own on the Arctic Ocean, which means that access to it would have to go through Norway or Russia.
      “Leaders in Murmansk are already open to discussing the matter. Ten years ago they only listened”, Lotvonen says.
      However, Murmansk has not yet received the tens of billions in investments promised by Russia’s leaders, and there is no indication of when new harbour terminals will be built, which will be needed if the volume of goods transport is to increase.
     
Although most of the more than EUR 100 million in investments promised for the Arctic region is earmarked for projects in Russia, the expectation is that projects in Norway, Sweden, and Finland will be implemented more quickly.
      In any case, a turning point has been reached in the Arctic regions, in which there is an increasing focus on practical projects.
      The clearest example of this is the Russian investment in the Helsinki Shipyard, which is set to build vessels specifically intended for Arctic conditions.
     
One interesting aspect of the rush to the north is the scant attention paid to aspects of military security.
      Ten years ago, Finnish generals were wary of projects involving the establishment of heavy-duty transport infrastructure between northern parts of Russia and Finnish Lapland. Lotvonen says that no such comments have been forthcoming recently.
      Military experts no longer see the transport routes as a security risk. Instead, they are seen as strategic assets for all of the countries concerned, and their protection is taken into consideration in connection with defence planning.
      The precise implications for Finland remain unclear.


Previously in HS International Edition:
  Shipping access through climate change (12.1.2010)
  What to do about Lapland?
  Receding ice may uncover Arctic riches (24.8.2010)

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